Every now and then, it’s helpful to take a look at what’s going on in the Mother Country (as the UK is sometimes called), if only for a preview of what’s probably coming here in the United States sooner or later.
In 1979, for example, the election of a Conservative majority in Parliament with Margaret Thatcher as prime minister foreshadowed the U.S. election of the following year that brought Ronald Reagan to the presidency.
Last month, within an eventful week, the British got both a new head of state, King Charles III, and a new head of government in Liz Truss, who succeeded Boris Johnson as prime minister.
The king has had mostly good press so far and is assuming the duties of the monarch to general applause. The same can’t be said for poor Truss.
Although there was a brief moment during which the media looked with approval on the fact that her cabinet contained not a single straight, white male, she soon blotted her copybook (as the English say) irretrievably, or so it might seem, with a so-called mini-budget by her new Chancellor of the Exchequer Kwasi Kwarteng.
What was the cause of such an intemperate outburst? In Sandbrook’s case, it was mainly his sense of what a poor parliamentary performer Truss was compared to her predecessors in office—something that always registers high (or low) in the ratings system of British historians.
But most of her detractors were hopping mad about something else. Funnily enough, it was that she seems to have modeled her “dash for growth” agenda on that of Reagan.
What we’ve known here in the United States from time to time as “supply-side” economics—based on cutting taxes and regulation to encourage economic growth—has now traversed the Atlantic in the opposite direction and is called in Britain “Trussonomics.” It’s not meant as a compliment.
“Reaganomics,” on which the neologism is apparently modeled, never really caught on in the UK, in spite of the rapport between Reagan and Thatcher on most matters. Nigel Lawson, then financial secretary to the Treasury in Thatcher’s government and later her chancellor of the exchequer, spoke at the time of the Reagan tax cuts as having been “grievously mistaken.”
Given the success of the American economy in the 1980s, you might expect him to have rethought that opinion—and, indeed, as chancellor in the late 1980s, he quietly reduced tax rates in the UK.
The Lawson tax rates remained in effect through most of the tenure of the Labour governments of 1997 to 2010, but the top rate was raised to 45 percent from 40 percent and remained at that level during the Coalition and Conservative governments that have served since 2010. It was Kwarteng’s re-reduction of it to a Lawsonian 40 percent in September that allegedly set off panic in financial markets and a run on the pound, and so it had to be withdrawn.
Like most noneconomists, I don’t know whether this loss of confidence in the chancellor’s judgment and the subsequent vitriolic denunciations of Truss, even from her own party, are justified or not, and I’m bewildered by such radically divergent views among those who are supposed to know about such things.
In fact, I suspect that such sudden and explosive movements in markets, up or down, are the original examples of what we now call groupthink. Things are rarely as bad—or as good—as the groupthinkers suppose, but they demand conformity all the same and don’t allow time to do its normal job of sorting true from false. That would be too risky, they think.
In other words, the Tories now calling for Truss’s resignation, many of whom voted for her as leader only weeks ago, are in a panic, and the spectacle of panic rarely does credit to the panicked.
But I think there’s an even better reason for doubting the consensus view, at the moment, that Truss has made a disastrous blunder, and that’s the dishonest language used by her most severe detractors.
Reich is far too intelligent not to know that “trickle-down economics” is not “still” with us because it has never been with us, except in the fevered imaginations of the left. Far from being, as the subheading to his article puts it, a “gonzo economic theory,” it’s not an economic theory at all, but a descriptive, all-purpose insult, invented in the United States in the 1930s for use against Herbert Hoover, who was as far from being a supply-sider as it’s possible to be.
But the point of the expression isn’t to describe any actually existing economic theory but to discredit economic practice or theory that doesn’t instantly produce the left-wing utopia of perfect economic equality.
“Down” is where, in nature, things do “trickle,” at least if they’re allowed to. It’s called gravity. You could look it up.
But radical theorists in the 1930s grew impatient with this, as with other natural processes, and thought that their own economic theories could supersede economic fact, changing the trickle to a flood by removing all the unnecessary people between down and up through which the wealth of nations normally trickles.
Except that when they got to try out their theories, as in the workers’ paradise of the Soviet Union, they found that all that wealth had suddenly dried up and was no longer available, either to trickle or to flood.
It’s the myth of trickle-down economics—and thus of its imaginary alternative, which is still with us—because it’s the only answer that the left has to the promise of Reaganomics and, now, even to Trussonomics. That seems to me a good enough reason to not panic, but to wait and see how the latter will work out. If it’s allowed to.
